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Mixed reactions to the budget

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There has been mixed reaction from the ICT sector to yesterday's budget, with Finance Minister Trevor Manuel both praised for his emphasis on infrastructure but criticised for not stimulating the business process outsourcing (BPO) sector with its potential for massive job creation. 

The Cape IT Initiative (CITI) has welcomed the budget, saying the Minister's reference to a greater access to finance for companies in the high-tech industries is possibly some of the best news we have had in many years. "Access to capital remains one of the key challenges facing our young IT companies and this will hopefully lower barriers to IT start-ups looking to take the next step in their growth and export strategies," CITI says in a statement.
"It was so rightly pointed out that focusing on microeconomic strategies would enable a country to deliver on macroeconomic goals. While the Minister calls on business, labour, government and regulators to jointly address challenges, especially in the areas of skills and the high cost of telecommunications, the greater ICT industry still finds itself in a malaise of uncertainty.
"More than ever we need clarity from our Minister of Communications as well as on legislation and regulation that will effectively allow for real delivery on Government¹s sweeping policies.
"Looking at the Estimates of National Expenditure, CITI is pleased to see that the Department of Communications budgeted for a new subprogramme of SMME development. This is to ensure the use of ICT in the development of small, medium and micro enterprises.  It has been CITI¹s experience that this is a vital part of ensuring a company¹s sustainability, and more importantly, competitiveness.
"However, while this is a positive step, we still believe the projected budget remains too low to effectively deliver on a national level.  More importantly, we would like to see further detail on how those finances are to be allocated as too often a lion's share of national budget goes to protracted investigations and studies while existing delivery mechanisms are ignored.
"CITI would like to see a platform where industry and other industry bodies can consult with the Department to give their input on how this money is can best be spent."
CITI also believes the fact that Minister Manuel has recognised the continued trend of globalisation is heartening.
"It is no coincidence that he refers to both China's rapid growth and the futuristic nature of Brazil's leadership. Both these nations are firmly on the radar of local IT companies and the possibilities for cooperation between our countries continues to be a priority for CITI.
"CITI believes that the Minister has so rightly pointed out that South Africa needs to take its place in the global economy. However, in order for us to do that we need to create a dynamic and robust knowledge economy ­ something only the development and use of technology will allow. The continued growth of our national IT cluster is therefore imperative."
Ronald Melmed, MD of Digital Archiving Solutions, believes the budget represents a missed opportunity to kick-start proven sectors of the economy – especially in light of recent news that retail sales sank to a six-year low after plunging 0.5% year-on-year in December.
“The announcement by Stats SA of the slowdown in consumer spending a week before the National Budget Speech could not have been more opportune. It gave Minister Manuel enough time to draw up a list of incentives aimed at the Business Process Outsourcing (BPO) industry,” says Melmed. "The Minister never mentioned the BPO industry in his speech."
Melmed says consumer spending has been the main driver of economic growth in the past few years.
However, it is often called a false economy because sustainable growth comes in the form of foreign and local direct investment in certain sectors known to generate jobs. BPO can place many of South Africa’s annual 300 000 school leavers and 100 000 graduates in the formal economy quickly and cost-effectively, he adds.
"With the retail sector running out of steam the timing is perfect for the BPO industry to get behind the economy and give it a real push. The extent of the push depends on the boldness of government."
Areas that will potentially impact the IT industry are a commitment to spend more of education and skills training; and a new tax for electricity use.
Skills training will help the industry close the estimated 100 000 jobs that will need to be filled by 2010.
In a move that could impact the deployment of new IT equipment, Minister Manuel yesterday announced a new levy on electricity usage of 2c per kilowatt hour.